Portfolio-level prioritising is fraught with problems… ambitious senior stakeholders, promoting their agenda, rarely meeting together to see how their projects compare to others resulting in a portfolio in continual flux – and not a little distrust.
Such vague, contradictory, fluid priorities at the top trickle down through the whole organisation… generating waste as they go….
Getting a stable, visible and well prioritised portfolio backlog is a key step towards successful Agile adoption.
Prioritising by ROI or a strict financial measure does not work – even though we wish it did and keep trying to make it so – an army of commercial accountants couldn’t set enough rules and then get everyone to play by them.
The underlying challenge
The real challenge is not whether to do a project – but which one to do next.
i.e. this is about prioritising, not about getting a business case signed off.
Every client I’ve worked with in the last seven years has had more than two years of projects with over 100% ROI in their backlog i.e. they would all pass the business case test.
The other challenge is to keep the business focused on the most valuable projects – and minimising Work In Progress (WIP). The easiest way to keep insistent stakeholders at bay is to at least START their project… spinning up more and more WIP as we do so.
Value is not enough
The value of an Epic (slice of project) or MMF (Minimal Marketable Feature) itself is not enough. Some valuable work is trivial to deliver, whilst another is costly – so our approach needs to quickly identify those with a high value:cost ratio – and get it moving through the system..
The value / cost ratio is the key– and we decide what constitutes value and cost – which means we can include some less tangible elements, like risk. We can also find a way to include ‘gut instinct’, which factors in our experience.
The ranking needs to be simple, quick, objective (as possible) and transparent.
The process itself adds value
The process encourages conversation and adds insight and understanding between stakeholders – this is not the wasteful process that some have suggested.
This approach helps to ensure the conversation at least starts from the same place – i.e. with a common understanding of what we are trying to prioritise.
No business should make a decision purely on such numbers – however, this weighting process at least allows for comparisons to be made.
How to get to a usable value / cost ratio
Both value and cost are made up of several elements, customised to the specifics of a company or programme.
For example, one of clients use the following:
These are then weighted by the stakeholders, depending on importance , with weightings adding up to 100.
Each element is given value of; 0,1,3,5 or 7, writing the text in the boxes is another valuable process for stakeholders to discuss and agree on.
This element score is then multiplied by the weighting to give an overall value score for that Epic or MMF.
Epic 1 ‘Remove step in the basket checkout journey’ scores;
- 3 for ‘strategic alignment’,
- 7 for ‘customer experience’
- 5 for ‘cost of delay’
giving an overall value score of 3x65 + 7x 35 + 5x10= 440
Whilst the cost is:
Epic 1 scores:
- 5 for effort to develop
- 1 for technical risk
- And 0 for architectural
Therefore Cost = 5x50+1x30+0x20 = 280
Giving an overall value / cost ratio of 1.57
All the epics can be summarised in a table like this..
At a glance we can see that Epic 3 gives us a greater return than Epic 1 – even though 1 has an overall higher value. This data is easily presented and understood by senior stakeholders.
It’s easy for one stakeholder to see what rankings have been given for an epic and to drill into the assumptions behind it and so we get discussion, trust building and a better decision.
The benefits are clear:
- The assumptions being made about value and cost are made explicit
- Asking why someone gave a 5 rather than a 3 quickly surfaces the underlying assumptions – and starts a valuable conversation.
- More visibility, and multiple perspectives means better decisions and stronger buy-in to those decisions – and a more stable backlog
- It’s quick – and there’s room for valuable instinctive ‘gut feel’ judgements
- Rather than in overly (misleadingly) precise financial models
- It results in a single number that can be used for an initial prioritising of the backlog
- Stakeholders can then adjust the order for dependency, or other business reasons that may not be in the model.
- Coming up with model is itself an useful step for senior stakeholders –
- What are really the key components of value and their relative importance
- Likewise for cost, there is a now a way to factor in risk and architectural impact and dependency and not just effort.
A way to calculate value delivered – another illusive metric
Having derived a value of an Epic it is now possible to begin tackle one of the most difficult questions facing an organisation or programme:
How much value have you delivered in the last quarter?
It’s now possible to total up all the epics delivered and their accumulated value and follow the trends… It’s true we don’t have an absolute value – but the trend does tell us something useful..
Note : Typically we have used to prioritise the MMFs and ‘Epics’ (slices of project) whilst in principle it could be used finer-grained user stories, the process would probably need adapting.